L8246 Architecture of Financial Regulation

This seminar examines the structure of federal financial regulation, both as it exists and the ideal forms it might take if one were starting from scratch. It thus serves two purposes. First, it provides a pragmatic overview of key financial regulatory bodies. Second, by contrasting the ideal models one might adopt and the historically contingent landscape that exists, the course provides an opportunity to consider the role of path dependency in regulatory architecture and the challenges and opportunities that result.

The structure of the course weaves these two aims together. The course begins by introducing two of the leading models for financial regulation, namely a "twin peaks" model and a single financial regulator. The course next examines the patchwork of financial regulators that populate the U.S. federal landscape. An average of one week will be devoted to each of the following: the Federal Reserve Board of Governors, the Federal Reserve Bank of New York, the Treasury Department, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, the Commodity and Futures Trade Commission, the Consumer Financial Protection Bureau, and the Financial Stability Oversight Council. The overview generally will entail consideration of: (1) the history giving rise to the creation of the regulator and, as appropriate, other historical events which dramatically altered the regulator's role; (2) the scope of its current mandate and authority; and (3) the character of the institution today (e.g., its size, whether it's dominated by lawyers, economists or others, proportion of employees in DC relative to field offices and the structure of the organization and its leadership). In addition to looking at each of the regulators in isolation, the course will use the 2007-2009 financial crisis as a lens for examining interactions among them. The course concludes by considering the policy reforms considered and adopted in the wake of the 2007-2009 financial crisis and the possibility of further reforms.

This seminar will require students to write five response papers over the course of the semester and one longer reflection paper. Response papers will require students to reflect on the themes of the course and to draw connections between readings from different weeks but will not require students to engage in independent research. Class attendance and participation are mandatory.